Credit to u0422811
Overview:
LLYVK is a tracking stock selling at 72% of net asset value. Management will close that discount within the year, recently announcing a spin off of the LLYV segment in the second half of 2025. With management noting that the current discount “sticks out like a sore thumb.”
The core equity holding in LLYVK is LYV, a dominant player in the live event market with strong competitive advantages.
This is exactly the type of situation I like. A Ben Graham type play. I just wish I had seen this one earlier.
As was previously pointed out by u0422811 : Most of LLYVK’s balance sheet is made up of equities, and most of that is in LYV. Live Nation. It owns 69.64M shares. $345M in other holdings and -$806M net cash. When LYV was trading at $115, the NAV was $82.27 and it was selling at $55.22.
All of this mispricing was due to the DOJs impending case against LYV, for anti competitive practices (which it certainly practices). The downside of this is limited considering past DOJ actions with LYV and the worst case scenario being a breakup of LYV which would put LYV at a value of 110, limiting downside.
Basically this position was a large chance of upside with a very limited downside.
u0422811 has covered this stock well previously, but I revalued the company again on 12/15/2024
Financials From the Latest 10-Q:
Outstanding share count (A,B,C, respectively) 25,563,295 + 2,541,341 + 63,633,585
Total share count: 91,738,221
Current cash in Liberty Live Group $388,000,000
Total liabilities in Liberty Live Group $1,200,000,0000
30% ownership of LYV at market cap $31,590,000,000
Market value of LYV stock $9,477,000,000
They also have other business interests that are not in the sec filings but are disclosed in their press releases.
- Associated Partners, L.P.: Liberty Live holds a 33% ownership interest in this investment and operating partnership. Specific financial details are not publicly disclosed.
- Griffin Gaming Fund: Liberty Live has a 3% stake in this gaming-focused venture capital fund. Griffin Gaming Partners manages over $1 billion in assets, including a $750 million Fund II closed in 2022. Liberty Live’s share would correspond to 3% of the fund’s net asset value.
- INRIX, Inc.: Holding approximately 4% ownership in this traffic data and analytics provider, Liberty Live’s stake value depends on INRIX’s private valuation, which isn’t publicly available.
- Kroenke Arena Company, LLC: Liberty Live has an ~7% profits interest based on the value of the Denver Nuggets (NBA) and Colorado Avalanche (NHL). This interest becomes payable upon a sale of these teams or upon Liberty Media’s exercise of a put right. Forbes valued the Denver Nuggets at $1.93 billion and the Colorado Avalanche at $860 million in 2023, suggesting a combined valuation of approximately $2.79 billion. A 7% profits interest would equate to about $195 million, though actual realizable value may vary.
- Liberty Technology Venture Capital, LLC: An 80% interest in this investment fund focused on Israeli technology companies. Valuation depends on the fund’s portfolio performance, which isn’t publicly disclosed.
- Overtime Sports, Inc.: Liberty Live holds a 7% stake in this sports media company. In 2021, Overtime raised $80 million in a Series C funding round, valuing the company at approximately $300 million. Assuming no significant changes, Liberty Live’s stake could be worth around $21 million.
- Tastemade, Inc.: Liberty Live owns 6% of this digital media company. In 2021, Tastemade raised $35 million in a Series E funding round, reportedly valuing the company at $500 million. Based on this, Liberty Live’s stake might be valued at about $30 million.
This gets me to $300M not including the unvalued assets.
Overall we get to a total market cap for LLYVK of $8,965,000,000
And a fair market value of $97.72
LLYVK is now selling for $70.52
Percent of NAV: 72%
A Coming Catalyst to Realize Value
The chairman and largest shareholder of Liberty Media Group is Dr. John Malone who is aligned with shareholders and admits that the discount “stands out like a sore thumb.”
Since u0422811 covered this stock, Liberty Media has announced its intention to spin off the LLYV segment.
“The split-off of Liberty Live Group into a separate public entity will simplify Liberty Media’s capital structure, should reduce the discount to net asset value of our Liberty Live stock and enhance trading liquidity at both entities.
“Liberty Media will affect the Split-Off through the redemption of Liberty Media’s Liberty Live common stock in exchange for common stock of a newly formed company to be called Liberty Live, Inc. Liberty Media would redeem each outstanding share of its Series A, Series B and Series C Liberty Live common stock for one share of the corresponding series of common stock of Liberty Live, Inc. As a result of the Split-Off, Liberty Media and Liberty Live, Inc. would be separate publicly traded companies, and Liberty Media would no longer have a tracking stock structure.”
This simplifies the capital structure.
“Quint would be reattributed from the Formula One Group to the Liberty Live Group in exchange for certain private assets.”
Quint was bought for $277 million in Jan 2024. So we could assume they shift a similar value of their private assets to the formula one group in exchange for Quint. This wouldn’t substantially change the valuation above.
” Liberty Media expects to complete the Split-Off in the second half of 2025.”
If they reach this expectation, then we can expect a revaluation and for the discount to significantly close by the end of 2025.
Other notes:
This was not something that my screener picked up, because of the unique capital structure and the complexity of the 10-Q. Therefore, I can see why this discount exists. One is not easily able to see the break out of cash, debt, or private assets on a balance sheet; one has to read through the 10-Q to find these items. The private assets and LYV shares are also not accounted for at market value, another reason that screeners don’t pick this up.
Buffett owns LLYVK, so I am in good company on this: https://finance.yahoo.com/news/warren-buffett-bolsters-portfolio-liberty-180107876.html
I generally like the businesses that they are in. Media and agency assets have a capital light structure that I like to see.
Risks
If LYV stock drops before the end of 2025 for whatever reason, then LLYVK will drop as well.
There is a small risk of antitrust action impacting LYV, but this is mitigated by a change in DOJ. Even if you don’t buy that view, u0422811 does a good job of allaying concerns generally about the suit.
Catalyst
The spin off of liberty media by the end of 2025.
Official end to DOJ anti-trust action.
Action
I bought on 12/15/24 at 70.52
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